Essays in Indian trade policy

Abstract

My thesis explores the political economy of trade protection in India. The first essayoutlines the political economy of trade protection in India. My second essay asks: HasProtection really been for Sale in India? To answer this question, I use a unique datasetto explain the political economy of trade protection since liberalisation. The traditionalGrossman and Helpman (1992) (GH henceforth) model of Protection for Sale (PFS henceforth)is used with a new measure of political organization. I undertake cross-sectionalanalysis for several years from 1990-2007 and use the pooled dataset. The third essayoutlines the modified PFS framework that introduces a new measure of lobbying effectivenessto analyse how heterogeneity in lobbying affects trade protection. The underlyingframework is based on the idea that government preferences or the market structure of theindustry can influence lobbying effectiveness. The empirical evidence provides estimateson effectiveness and examines its determinants. The fourth essay explores: Is Protectionstill for Sale with Lobbying Effectiveness? I undertake an estimation of the modified PFSmodel against the conventional results presented in my second essay. I examine if differencesin lobbying effectiveness can explain the variation in tariff protection levels acrossIndian manufacturing sectors and construct a direct measure of lobbying effectiveness forIndian manufacturing. Finally, I include additional political factors of importance to Indiantrade policy. The fifth essay asks: Join Hands or Walk Alone? I examine the factors thataffect the choice of lobbying strategy of Indian manufacturing firms for trade policy andconsider the exclusive use of a single strategy, to lobby collectively (Join hands) and lobbyindividually (Walk Alone), along with the possibility of a dual strategy i.e. a combinationof collective and individual lobbying using information from a primary survey across 146firms. The results are new for India and reveal the overall preference of a dual lobbyingstrategy.